The Buying Issue The Buying Issue www.FirstCommand.org

Principles Discussed Protection Under Federal Law Renting a Home Advantages Disadvantages Buying a Home Which Choice is Right for You? The Buying Issue www.FirstCommand.org

Protection Under Federal Law The Fair Housing Act The Equal Credit Opportunity Act The Fair Housing Act and the Equal Credit Opportunity Act were created to protect the rights of homebuyers, renters, and landlords, as well as to provide equal opportunity for home purchasing/renting and mortgage lending. Prohibited practices outlined by these laws will be listed in this module along with resources for obtaining additional information and reporting any violation of these laws. Certain rights and responsibilities deal specifically with the landlord/tenant relationship. These are usually outlined in a rental agreement, commonly referred to as a lease. The lease will provide detailed information about what is expected from each party. It is signed by renter and landlord and is a binding contract. Though many of the rights and responsibilities may be the same in different locations, landlord/tenant laws vary from state to state and should be researched based on your location. The Buying Issue www.FirstCommand.org

Renting a Home The Buying Issue www.FirstCommand.org

Advantages of Renting a Home Minimal maintenance costs Flexibility to move without having to find another renter Ability to establish your credit rating Does not lose equity When it comes to renting your home, some of the advantages include: Minimal maintenance costs All a renter has to do is pay rent and move in. Repairs, maintenance, yard work, taxes, and, on occasion, certain utilities are usually the responsibility of the landlord rather than the renter. Ability to relocate If a renter chooses to move, there are few strings attached; the remainder of the lease may be negotiated with the landlord. There is no burden of finding a buyer. If your career and or life choices cause you to move frequently, renting may a better choice. Renter builds a credit rating By paying rent and utility bills on time, a renter builds a positive credit history. No lost equity Since the renter does not own the home, the property value does not affect the renter financially. The Buying Issue www.FirstCommand.org

Disadvantages of Renting a Home Have to make monthly payments, based on the price set by the owner of the property Earn no equity Do not receive tax advantages Limited on making improvements or changes to the property Monthly payments Rent is determined by the landlord and so it’s up to their discretion on changes to the amount of rent due. No equity A renter will never establish or benefit from any equity or ownership position.   No tax advantages A renter cannot claim tax deductions for rental payments. Limitations Renters are limited in terms of making improvements or changes to the property. The Buying Issue www.FirstCommand.org

Buying a Home The Buying Issue www.FirstCommand.org

Advantages of Buying a Home You have an investment You build equity You receive tax advantages You may make property improvements and changes subject to building codes Investment (building equity) After 10 years of paying rent, a renter has little to show for it. After 10 years of mortgage payments, a homeowner has invested in property with strong potential for the home’s value to increase and for increased equity in the home.   Tax advantages Certain items, such as interest on mortgage payments, can be deducted from a homeowner’s taxable income. Flexibility A homeowner can make design and structural improvements, subject to local building and housing codes. The Buying Issue www.FirstCommand.org

Disadvantages of Buying a Home Your equity and investment will to fluctuate You are responsible for property taxes, maintenance, insurance, etc. You have little flexibility in moving until you find a buyer for your home Equity/investment They are subject to fluctuation based on market conditions Sometimes neighborhoods decrease in popularity and value can decline.   Maintenance Costs All maintenance, repairs, upgrades, taxes, and insurance are the homeowner’s responsibility Difficulty relocating If a homeowner needs to relocate on short notice, moving may be delayed until a buyer is found for the home. The Buying Issue www.FirstCommand.org

Which Choice is Right for YOU? The Buying Issue www.FirstCommand.org

Determine Your Options Some things for consideration is to determine: Your dwelling needs, not wants Your lifestyle; based on reality and practicality What you can reasonably afford All the costs associated with your choice Once the decision to purchase a home is made, you should calculate the cost of home ownership and the impact it makes on your budget.   Your first step is to determine your needs. If you only consider your wants, you might be passing up a great opportunity for a house that meets your needs. Look at your lifestyle and determine what’s realistic based on your income and expenses that will incur. What has to change about your lifestyle to be able to afford this new home? Consider all your costs and look for a place that you can reasonably afford. The Buying Issue www.FirstCommand.org

Things to Consider Down Payment Income Mortgage Rate Homeowner’s Insurance Loan Period Utilities Property Tax There are other things to consider when buying a home, besides the initial down payment and mortgage payments. Your current and projected income The down payment for the home Your mortgage rate The length of the loan The taxes on the property determined by your local government The utilities Homeowners’ insurance The Buying Issue www.FirstCommand.org

Which Option is Best… for You? To rent a home or to buy a home depends on: Your lifestyle Your preparation Your finances Your goals The decision to purchase a home is not an easy choice to make, but through preparation, research, and planning, the transition from renter to owner can be carried out smoothly. Be sure to analyze your desire to purchase a home, so you can be certain that home ownership is right for you. Review your finances, income, expenses, and debts to confirm you have the means to accommodate a mortgage and the other costs of owning a home. The Buying Issue www.FirstCommand.org

Questions First Command Educational Foundation 1 FirstComm Plaza Fort Worth, TX 76109-4999 Toll Free: 1-877-872-8289 www.FirstCommand.org The Buying Issue www.FirstCommand.org